Wednesday, February 1, 2017

Complaint Alleges Nation’s Second-Largest Internet Service Provider Systematically And Knowingly Failed To Deliver The Reliable And Fast Internet Access It Promised To Subscribers Across The State

Suit Seeks To Compensate Spectrum-Time Warner Cable Subscribers For Five Years Of Broken Promises And Damages And Restitution That Could Be Worth Upwards Of Hundreds Of Millions Of Dollars

Attorney General Eric T. Schneiderman today announced a lawsuit against Charter Communications Inc. (“Charter”) and its subsidiary Spectrum Management Holdings, LLC, (f/k/a Time Warner Cable, Inc.,) (together, “Spectrum-TWC”) for allegedly conducting a deliberate scheme to defraud and mislead New Yorkers by promising internet service that they knew they could not deliver.

The complaint alleges that since January 2012 Spectrum-TWC’s marketing promised subscribers who signed up for its Internet service that they would get a "fast, reliable connection" to the Internet from anywhere in their home. But a 16-month investigation by the Attorney General’s office – which included reviewing internal corporate communications and hundreds of thousands of subscriber speed tests – found Spectrum-Time Warner subscribers were getting dramatically short-changed on both speed and reliability.

The suit alleges that subscribers’ wired internet speeds for the premium plan (100, 200, and 300 Mbps) were up to 70 percent slower than promised; WiFi speeds were even slower, with some subscribers getting speeds that were more than 80 percent slower than what they had paid for. As alleged in the complaint, Spectrum-TWC charged New Yorkers as much as $109.99 per month for premium plans could not achieve speeds promised in their slower plans.

“The allegations in today’s lawsuit confirm what millions of New Yorkers have long suspected -- Spectrum-Time Warner Cable has been ripping you off,” said Attorney General Schneiderman. “Today’s action seeks to bring much-needed relief to the millions of New Yorkers we allege have been getting cheated by Spectrum-Time Warner Cable for far too long. Even now, Spectrum-Time Warner Cable continues to offer Internet speeds that we found they cannot reliably deliver.”

The AG’s investigation also found that Spectrum-TWC executives knew that the company’s hardware and network were incapable of achieving the speeds promised to subscribers, but nevertheless continued to make false representations about speed and reliability. The investigation further revealed that while Spectrum-TWC earned billions of dollars in profits from selling its high-margin Internet service to millions of New York subscribers, it repeatedly declined to make capital investments necessary to improve its network or provide subscribers with the necessary hardware.

As the complaint alleges, Spectrum-TWC continues to underserve their subscribers by failing to make the capital investments necessary to live up to their promised speeds. These investments would include substantially upgrading Spectrum-TWC’s network capability and replacing large numbers of deficient modems and wireless routers that subscribers currently pay Spectrum-TWC up to $10 per month to rent.

Spectrum-Time Warner Cable currently has approximately 2.5 million subscribers across New York State.

The complaint specifically alleges a series of false and misleading practices by the company over the course of several years, including:

Spectrum-TWC Misled Subscribers By Falsely Promising Speeds It Knew It Would Not Deliver

The complaint alleges that since at least 2012, Spectrum-TWC represented to its New York subscribers that they could get fast and reliable Internet access. However, the company knew that these promises were impossible to keep for several reasons. First, Spectrum-TWC leased deficient modem equipment to subscribers that could not deliver the promised speeds. Second, in addition to the equipment failures, Spectrum-TWC’s network was overloaded and could not consistently deliver the speeds it promised to subscribers. That was because Spectrum-TWC did not design the network to reliably deliver the promised speeds. Moreover, the complaint alleges that Spectrum-TWC decided to cut costs by not fixing the equipment and network failures. To mask its misconduct, the complaint alleges that Spectrum-TWC rigged test results.

For example:

During the Relevant Period, Spectrum-TWC leased deficient cable modems to over 900,000 subscribers in New York that could not deliver the advertised speeds. As of February 2016, Spectrum-TWC still charged over 185,000 New Yorkers, or roughly 7% of its 2.5 million active subscriber base at the time, $10 a month for deficient modems that, in its own words, were “not capable of supporting the service levels paid for.”

The results of numerous tests from multiple Internet speed measurements confirm that Spectrum-TWC delivered to subscribers on Spectrum-TWC’s fastest speed plans only a third to a half of the download speeds—sometimes even less—than they had paid for.

Spectrum-TWC Misled Subscribers By Promising Wireless Connectivity That It Knew It Would Not Deliver

The complaint alleges that since at least 2012, Spectrum-TWC promised its subscribers go-anywhere wireless connectivity in their homes. However, the company knew that the wireless routers provided to subscribers could not deliver the promised speeds or service.

For example:

As of February 2016, Spectrum-TWC supplied over 250,000 subscribers on 200 Mbps and 300 Mbps plans deficient WiFi routers that Spectrum-TWC knew could not deliver speeds above 100 Mbps.

Separately, Spectrum-TWC ignored its own engineers and promised subscribers a home WiFi experience that was beyond the technical limits of its equipment and WiFi technology.

Spectrum-TWC Misled Subscribers By Promising Fast, Reliable Access to Online Content That It Knew It Would Not Deliver

The complaint alleges that since at least 2012, Spectrum-TWC represented to their subscribers that they would get fast, reliable access to content online like Netflix and gaming. However, Spectrum-TWC knew that it could not deliver on this promise because of the state of interconnection points in the transmission of online content. Specifically, the company was aware of, and sometimes deliberately created, bottlenecks at interconnection points, which resulted in slowdowns and disruptions to subscribers’ service.

For example:

Spectrum-TWC knew that bottlenecks in its network would result in many subscribers routinely experiencing the very hallmarks of a poor Internet connection—slowdowns, lag time, buffering and interruptions, yet its marketing specifically promised that they would avoid when streaming videos, playing online games and accessing other online content.

But these executives traded on the fact that most subscribers had a limited choice of Internet service providers and that the technical complexity of deducing the problems would make it difficult for subscribers to pin the blame on the company.

The New York-based cable operator, originally known as Time Warner Cable, is currently rebranding itself as “Spectrum” throughout the state. Spectrum-TWC provides Internet service to approximately 2.5 million households/subscribers in New York State, and the complaint covers the subscription plans of almost 5 million subscribers over the relevant period.

In its filing, the New York Attorney General’s Office is seeking restitution for New York consumers as well as appropriate injunctive and equitable relief to end Spectrum-TWC’s longstanding deceptive practices.

This investigation was handled by Bureau of Internet and Technology Bureau Chief Kathleen McGee, Consumer Fraud Bureau Chief Jane Azia, Executive Agency Counsels Simon Brandler and David Nachman, Assistant Attorneys General Aaron Chase and Mihir Kshirsagar of the Bureau of Internet and Technology, and Assistant Attorney General Kate Matuschak and counsel Alex Goldman of the Consumer Frauds Bureau, with assistance from Director of Research & Analytics Lacey Keller and Analyst Lucas Chizzali. The Bureaus of Internet and Technology and Consumer Frauds are overseen by Executive Deputy Attorney General for Economic Justice Manisha M. Sheth.

Columbia law professor Tim Wu served as a consultant to the Office of the Attorney General in connection with this matter.